Insurance companies staring at the vacuum of cost-sharing subsidies

Pegged at $7 billion for 2017 and $10 billion for 2018, cost sharing subsidies are key to the survival of insurance companies. Without them, insurers say they will be forced to raise insurance premium rates by at least 20% next year.

While the Trump Administration increases its focus on repealing the Affordable healthcare Act, also known as Obamacare, health insurers are busy trying to figure out how to price their premiums in various market segments so as to garb them as affordable.

Hospitals on the other hand have a dilemma which is diametrically opposite to this position: they are concerned that a spike in the cost of premiums in Obamacare will cause many people to just drop their insurance coverage, which will significantly impact their potential revenues.

Even if the Trump Administration is successful in repealing the Affordable Healthcare Act and replaces it with the American Health Care Act (AHCA) it will still not solve a critical outstanding issue for insurers looking at 2018: will the government continue to fund the cost-sharing subsidies that help individuals pay for care?

This is the core issue that has kept health insurers awake at night and they have sent out press statements, written scores of letters to the U.S. Congress and have spoken about it in conference calls, highlighting the fact that they need more certainty about the premium payments for insurance coverage.

According to Scott Serota, the chief executive of Blue Cross Blue Shield Association, Thursday’s House vote in itself does not stabilize the exchange market.

“It also is critical to fund cost-sharing reductions during this time,” said Serota.

As per Molina Healthcare Inc, an insurer which has more than 1 million exchange members, “While the debate on AHCA now moves to the Senate, Congress and the Administration must ensure that the state Marketplace exchanges are stabilized through at least 2018,” including finding subsidies and enforcing the mandate that people have health insurance.

Significantly, cost-sharing subsidy payments received from the government are estimated to be at $7 billion in 2017. They are slated to touch $10 billion in 2018. According to insurers, without them they will be forced to raise insurance premiums rates by at least 20% in 2018.

On Thursday, Maryland released the proposed premium rates filed by insurers for 2018’s individual market which showed a hike in insurance premium rates in the range of 18% to 58%.

These huge surges in insurance premium hikes have lent weight to the notion that lawmakers are working on parallel paths to undo the law and thus create a healthcare market where insurance plans are so expensive that they make economic sense only for those who can afford the steep cost of medical healthcare.

Thursday’s vote comes midst insurance companies racing to meet state deadlines on submission of insurance plans for 2018. This has compelled many insurers to take decisions.

Aetna pulled out of Virginia this week.

“I think the decision-making that we have to make right now has to be based on the reality as it is today,” said Shawn Guertin, Aetna’s chief financial officer, in an interview on Tuesday after the news of Aetna losing out on a $200 million business hit the market.

Advertisements


Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

Tags: , , , , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: